The Effects of Inward FDI on Chinese Exports

Abstract: Recently, China has become the largest exporter and stays one of the most extensive inward FDI destinations worldwide. A question arises, to what extent inward FDI had an impact on the exports growth? Firstly, theoretical reviews of China’s FDI policies and what influence they have on exports performance are provided. Secondly, two hypotheses focusing on different time periods are proposed. Furthermore, an econometric model analyzing the effects of inward FDI on exports is constructed. This study uses panel data estimation techniques and dataset that covers 29 Chinese provinces during time period from 1986 to 2009. The results suggest that there exists a relationship between FDI and exports; however it varies depending on the time period chosen. Furthermore, the results stay robust to the changes of independent variables as well as to the inclusion of additional variables.